A confluence of ideas and an attempt to penetrate the murky dealings of our fair city.

Friday, September 30, 2011

The Politics of Parking and Pensions

I think almost everyone has probably grown tired of the parking and pension issue. But I promised to cover the politics of the solution and so cover it I will.

I don’t take the various proposed solutions to the pension crisis to have been undertaken in bad faith by either Ravenstahl’s office or the council. However, I do think that it was, at bottom, a political solution. That is, a solution that had as much to do with keeping a scorecard of winners and losers as it had to do with bailing out the pension.

Let us start with the mayor’s proposed solution. Lease the parking assets for 50 years to LAZ. This would have generated an immediate 452 Million, of which 230 Million was to go to the pension fund. The rest was discretionary, though it was suggested that some of the remainder would also find its way into the pension fund.

Now on the face of it this doesn’t seem like such a terrible plan. 452 Million, if invested at 6% a year, will compound to almost 8.5 Billion over 50 years. Further the provisions of Act 44 still allow for the city to impose a parking tax. Finally, a great deal of repair, maintenance and employee costs would be reduced under this lease plan.

But the plan was rejected. Informing this rejection was the idea that a long term of lease of assets should be a last resort for any city. Something that should only be done when there is no other way to make budget. In fact, Chicago’s 75 year lease of parking assets and the steep increases in parking rates was also on everyone’s mind during that time. It was widely reported that LAZ was aggressively enforcing meter times and paid that city about a quarter of what its parking assets were worth.

Now, fair enough, LAZ may be a company with more to gain from this deal than the city. It certainly would have imposed a more aggressively enforced and expensive parking deal and they would have been largely outside of public control.

So what did we get instead?

More aggressive enforcement, more expensive parking and a parking authority that is largely outside public control!

However, in order to get that we had to go through a few different plans. Each was rejected in some form or other by the mayor’s office.

Throughout the argument between city council and the mayor a fairly constant refrain could be heard – “keep public assets public”. Indeed, Dowd did a great deal to forcefully articulate this position at every opportunity, though I often took him to speaking for most everyone else when he did.

The problem is that many of the proposals offered by council didn’t really do that.

It might help to recall the various alternatives that were being floated at this point in the debate.

One scheme would have given the parking infrastructure directly to the pension fund.

-This would have, perhaps, saved the pension but it would have then been outside the public control and little would have improved in the parking authority.

Another was to sell the parking infrastructure the city owned to the parking authority and use the proceeds to fund the pension.

-Given that the mayor controls the authority this also would have reduced the public nature of these assets. The money would have flowed into the parking authority not the city. Again, nothing in this plan improves the service of the parking authority.

Still another was to lease certain lots and meters to a private contractor for 40 years but with a revenue sharing agreement.

- Again maybe this prevents the takeover, but the other issues are untouched or made worse.

Which brings us to the proposal that won out. Transfer the parking tax revenue stream to the pension fund for the next 40years, and deal with the hole created in the budget by demanding a greater cut of the increased revenue brought on by rate increases and aggressive enforcement from the parking authority.

I suppose this keeps public assets public but only nominally so. The problem is that the lion’s share of the parking infrastructure is still controlled by the parking authority and they have been particularly recalcitrant in coming to a new deal on sharing that revenue stream. While the authority is controlled by the mayor’s office, and so is in some sense under public control, in reality this extra layer of bureaucracy insulates the parking authority from real oversight and scrutiny.

Now city council was facing a deadline here and had little support form the mayor’s office, but it should still be pointed out that while they had criticized the mayor for playing a game of brinkmanship, they did something similar. They essentially put themselves in a position to go broke if the parking authority didn’t renegotiate its revenue sharing agreement with the city.

In this interplay between council and the mayor, the urge to position oneself to declare victory over the other is particularly palpable. The mayor wants to see his plan succeed and so he ignores alternatives and refuses to allow his parking authority to cooperate with council’s plans. In response the need to show up the mayor as uncooperative leads council to stretch their authority to the absolute limit and essentially make the city’s budget contingent on that cooperation.

As far as the second desire of Dowd’s goes, this was obviously accomplished. The pension fund was saved. Still, that outcome looked far from certain for a long time and I have heard privately from many who were surprised by that outcome.

Was the parking authority’s service improved? No. But then, I wonder if that was really a realistic goal anyway. If Dowd believed he could pull this off, he is to be admired for his ambition, but I suspect that this functioned as another talking point: another way to needle Ravenstahl.

So here we sit with some tough decisions to make about parking revenue, some tough politicking to get the parking authority to accept a new revenue sharing agreement, and the silver lining – a plan that actually rescued the pension fund.

But I don’t think we are in any position to say, from this position, whether that solution was the best one. We still have one of the problems that come with the lease plan – more expensive parking and aggressive enforcement. And we don’t enjoy the benefits of outsourcing maintenance, employee costs and repairs. These are largely benefits the parking authority would enjoy, but if we consider that a ‘public entity’ then I guess we can claim those costs and benefits as our own.

We also have the pension fund under our control, in some sense. We can’t really tamper with the revenue stream, though at least we made the decision to use that revenue. And while keeping it seems like a victory, in reality it is a mixed bag.

The state’s pension fund would have given us lower administration costs, more realistic projections of growth and would have been subject to more professional management. (Our pension fund, in contrast, has made risky investment decisions and recently pulled assets completely out of the stock market – losing millions) But turning the fund over to the state would have come with new taxes. At least by gaining revenue from parking we take some share of the money from the pockets of our suburban neighbors.

Finally, have we kept public assets public? We haven’t privatized them, certainly, but we don’t have ready access to the revenue generated by them either. If they were public assets in the first place, I guess we have kept them as such. But there are real obstacles to seeing them as ever truly public.

13 comments:

Anonymous
said...

Here is the problem. Authorities exist for a reason. Right? I mean the City could just own the parking assets and take all the revenue. So why does the authority exist (or any authority)? Start to answer this question and you will get to the bottom of this problem. I suggest that authorities exist in some respect to take them out of the control of the City. In addition, each authority has a mission. Is the mission of the parking authority to subsidize parking? Is it to generate revenue for the City? Is it to ensure that in fact there is adequate parking? Is it to aid development by coordinating parking efforts City wide?

The problem with the authority is that any of it's problems over the years are because of City interference. But the City and council really dot want to take control because then they are accountable. Why is it that the parking authority pension is 90% funded but the City is less then 50% (oh, I forgot 62% due to present value). What happens to liability of the City if it starts exercising undue control of PA? Where is the solicitor on this parent company control problem?

Thus, what plan would get the pension funded, allow the efficient management of the PA and serve residents. I'm nit sure, but start by asking what the parking authority exists to do and go from there.

The problem with the authority is that any of it's problems over the years are because of City interference.

That seems very beside the point as it is entirely a creature of city government. Everything it has done right is also because of city involvement. It and things like it exist to get something off one set of books an on to another to make it easier to borrow money.

@AnonI too used to think that authorities existed to fulfill some purpose. As though some founding fathers had concluded that governance by boards and authorities was the best system to encourage expertise, or independence, or executive control. But, I don't think that is the case anymore.

The truth is that the PPA seems to exist as a kind of 'financial fiction', a way to move debt from one set of ledger books to another. Understanding it this way makes sense of council's willingness to treat it as under their control even though it is not. Simply put, it only exists a debt instrument, the nominal independence that it enjoys from the political is only there to fool the accountant and so council doesn't see it as a real obstacle to the exercise of legislative control.

But, of course, its nominal independence still needs some form of codification and so it is placed under the mayor's control -through appointments. As such, its unwillingness to cooperate seems to owe more to the hostility that exists between mayor and council than to any real substantive disagreements over how best to run the city's parking.

That said, council certainly didn't appear to be looking for expertise or advice from the parking authority when they came up with the new funding package - they just implemented a bad set of changes that they were later forced to repeal. Chalk this up to the year long neglect of the Dec 31st deadline or blindness brought about through desperation. Either way it looks like council neglected the opportunity to get feedback on their plan. Though, whether that would have been forthcoming if they had asked is another question altogether.

MH and SteelCity Mud - you are still missing my point. SteelCityMud less so. All of the talk about the Mayor or Council and he said she said is just part of the problem. My point is that if you want good policy you need to look beyond this feud. Forget about Luke and Bill for a second. What is the purpose of the PPA? Or, if you prefer what SHOULD be the mission of the PPA? Once you have decided that policy decision, then decide what should be done with the current debate. Good public policy is only achieved by, uh, making good public policy. It is then up to the elected representatives to execute on that policy. If they don't, then we criticize and replace. But we first need to decide what policy we want them to implement.

@Anon I think I take your point, but it is hard to answer the question straightforwardly.

You ask 'what should be the mission of the PPA?'. It is a good question, but I think it conceals an assumption. Shouldn't we ask if we need this thing at all? After all, as a debt instrument it is certainly serving its purpose. It might not be prudent to try and get something designed for that job to do another.

But, lets grant the assumption and say we want to keep the PPA and assign it a role through policy. It seems clear that we will want a board that can provide expertise, independence from the political process, and can exercise foresight. It would seem that on a few of these counts we could do better. So there is still an obvious basis for criticism here. And when the politics are put on top of it, the role it actually plays looks especially troubling.

I wasn't raised here and I don't know any of the elected officials. I hardly know anybody who works for local government and none of them are in management. In the sense of being in any way invested in any faction of local government, it would be very hard to find someone less blinded than me. I am unhappy with local government for many very obvious reasons and on the parking issue I picked the council over the mayor mostly because the council’s plan seemed too half-assed to be permanent. When you have two bad plans, the one that won’t last seems better.

That said, I have very little interest in parking policy outside of its use as a way to get funding for the city. I pay attention to city finances because the taxes I pay to the city and the real estate I own in it are crucial components of my person financial situation. Paying attention to parking qua parking strikes me as well and truly pointless. Somebody should do it, but I fail to see why it matters to residents if it is done by the city or the PPA or GlobalPark Corp.

Seriousli, how hard is this? Stop with the politics or whether the board is a bunch of idiots. Let's presume all ofmthat is true or none of it. Take your pick. The question is still the same. What should the policy be? If the answer is as you seem to apply that the PPA should be nothing more than a revenue source for the City, then so be it. How do we best accomplish that? We do it be having an independent board that doesn't react to political pressure and raises rates to the highest level the market will allow and cuts costs as much as feasible, right? So, what do we do next?

Your proposal doesn't do anything to stop politics. It just makes the number of people who can play politics smaller. If somebody says, "Stop with the politics" they usually mean "Do everything my way." That is a political argument regardless.

As near as I can tell, your proposal is "having an independent board that doesn't react to political pressure." This is either an empty banality* or a call in support of the status quo except with nobody complaining about it.

*unless you actually have the ability to reconstitute a local authority in which case I hope you've got all your stuff unpacked in your new office in Harrisburg.

Wrong - you still don't get it. I am asking you what you think good policy should be. I am suggesting that policy comes first. Whatever that policy might be. Once we set policy, then we create the entity and structure to carry it ou. Unfortunately, just like you most on Grant street are too caught up in politics to think about good policy first.